Suit Seeks to Nullify Clothier's Liability Insurance

A Los Angeles clothing maker noted for his progressive labor practices -- and provocative advertising -- has been sued by his insurance company, which says he created a sexually hostile work environment.

In a complaint filed this week in federal court in Los Angeles, New York-based Navigators Insurance Co. seeks to cancel an employment liability policy taken out by American Apparel Inc. and to escape any obligation to pay for pending harassment claims. The suit claims company owner Dov Charney lied about having a zero-tolerance policy against sexual harassment.

A lawyer for American Apparel declined to comment on the lawsuit, saying he had not yet reviewed the complaint.

Since starting the company in 1997, Charney has been called a progressive employer in an industry often cited for sweatshop conditions. Some in the industry laud him for providing relatively generous pay and benefits to workers who sew his T-shirts, jackets and pants.

At a time when many U.S. clothing makers are fleeing abroad, Charney claims to operate the nation's largest garment factory -- employing, according to the company's website, more than 3,000 people in downtown Los Angeles. The company operates at least 37 retail stores in the United States and 28 abroad.

In recent months, however, a different portrait of Charney has emerged. In a sexual harassment suit filed in May, a former employee charged that Charney exposed himself to her, appeared in the office clad only in underpants and, on one occasion, called her into his office to give her a vibrator.

In a second suit filed in May, another former employee alleged that Charney conducted her job interview in his underwear, fondled his genitals in front of her on other occasions and repeatedly made derogatory comments about her and women generally.

A company spokeswoman did not respond to questions about the two claims.

In the latest lawsuit, filed Monday in U.S. District Court, Navigators Insurance contends that Charney failed to disclose that yet another former employee had applied for a temporary restraining order against him because of what she claimed was his verbal and mental abuse and threats of violence.

The insurer's suit also says Charney falsely declared that "the company's policy is zero tolerance for sexual harassment." The complaint also notes that the female author of a June 2004 profile in Jane Magazine wrote that Charney repeatedly masturbated in her presence.

Based on what Navigators termed "the material misrepresentations" in American Apparel's application, the insurer issued the company a $2-million employment liability policy for the year that ended Aug. 30, 2005. The company is seeking a court order that it will not be liable for payouts in harassment cases pending against American Apparel. In exchange, Navigators would refund the $29,700 premium paid by the clothier.

Charney's company is no stranger to controversy -- cultivating an edgy image with advertising that features models in sexually suggestive poses. But his reputation as an enlightened employer will not easily be damaged, said one industry observer.

"Dov has done a lot for his employees," said Ilse Metchek, executive director of the California Fashion Assn., a trade group representing garment industry employers. And "we are a community of eccentric individuals."

But Julie Su, litigation director for the Los Angeles-based Asian Pacific American Legal Center, which represents garment workers, was more critical.

"I think that these allegations completely undermine his status in the workers' rights community," she said.